* The management report of Merck KGaA, Darmstadt, Germany, has been combined with the Group management report and published in both our 2015 Annual Report and our Annual Financial Statements. The authoritative German versions of the annual financial statements and the combined management report of the Group and Merck KGaA, Darmstadt, Germany, for 2015 have been led with the electronic German Federal Gazette and are available on the website of the German company register.

Research and Development

We discover and develop new products and solutions worldwide to improve the quality of life for patients and to meet customer needs. We consistently aim to further optimize the relevance and efficiency of our research and development activities, whether in-house or through external collaborations.

Around 5,000 employees work for our researching innovations to serve long-term health and technology trends in both established and growth markets.

We spent around € 1.7 billion on research and development in 2015. Here we focus on both in-house research and external collaborations, which enable us to increase the productivity of our research while simultaneously reducing financial outlay.

The organizational set-up of our research and development activities reflects the structure of our company with three business sectors.

Healthcare

Biopharma

The R&D organization of our Biopharma business advanced several key programs in 2015, both in the early and late stages of development – many of which are molecules discovered at our company. With a clear focus on oncology, immuno-oncology and immunology, there is significant potential in the near term to benefit patients and the business.

Under the direction of Luciano Rossetti, MD, Head of Global R&D, several new senior leaders joined the organization, including Alise Reicin, MD, Senior Vice President, Head of Global Clinical Development, and Laszlo Radvanyi, MD, Head of the Translational Innovation Platform Immuno-Oncology. In addition, Joern-Peter Halle, PhD was appointed Head of External Innovation for Biopharma R&D.

In September, our Biopharma business announced the expansion of its R&D facility in Darmstadt, Germany. We are investing € 65 million in a new laboratory building that will span more than 16,000 square meters and accommodate approximately 200 current employees whose focus will be on accelerating innovation in R&D. The new building will unite different functions within R&D Discovery Technologies, including Molecular Pharmacology, Medicinal Chemistry, Computational Chemistry, Molecular Interactions and Biophysics, Protein Engineering and Antibody Technologies, and Protein and Cell Sciences. The research building, when completed in autumn 2017, will be located within the new “Pharma Square” at our global headquarters in Darmstadt. We are thus uniting a significant part of our R&D activities in a single area, creating ideal conditions for the advancement of our biopharmaceutical pipeline.

Oncology

Regarding Erbitux®, in April 2015 the safety division of the Japanese Ministry of Health, Labour and Welfare issued an official notification to update the product information of Erbitux® for use in unresectable, advanced or recurrent colorectal cancer (CRC) patients with wildtype RAS tumors, in line with the current approval status in Europe.

At the European Society for Medical Oncology (ESMO) World GI (Gastrointestinal) Congress in Barcelona, Spain in July, results were presented from the Phase II CAPRI-GOIM trial. This was an independent study performed by an academic group which enrolled 340 KRAS exon 2 wild-type m CRC patients. Patients received first-line treatment of FOLFIRI plus Erbitux® and responders were then randomized to receive second-line treatment of FOLFOX plus Erbitux® or FOLFOX alone. A quadruple wild-type population from this study (no mutation in KRAS, NRAS, BRAF or PIK 3CA; assessed by next-generation sequencing) showed significantly prolonged progression-free survival, improved overall survival, and response rates with second-line Erbitux® / FOLFOX after first-line Erbitux® / FOLFIRI. This suggests that continuing anti-EGFR treatment while switching the chemotherapy backbone in second line is feasible following progression, although confirmatory data from other studies will be needed.

Evofosfamide is an investigational hypoxia-activated prodrug thought to be activated under severe tumor hypoxic conditions, a feature of many cancers, which was investigated in Phase III trials in two indications (soft tissue sarcoma and pancreatic cancer). In May, we announced that the U.S. Food and Drug Administration (FDA) had granted Fast Track designation for the development of evofosfamide for the treatment of previously untreated patients with metastatic or locally advanced unresectable pancreatic cancer. In December 2015 the outcome of both indications being investigated in Phase III was assessed. Unfortunately studies in neither indication achieved their primary endpoints. The decision was subsequently made to discontinue the development program for evofosfamide and we returned the rights to the program to Threshold Inc.

Tepotinib, an investigational small molecule inhibitor of the c-Met receptor tyrosine kinase, progressed into two Phase II parts of the ongoing Phase I/II trial. In early 2015, it was moved to the Phase II part of an ongoing Phase I/II trial in Asian patients with Met-positive (Met+) EGFR mutant non-small cell lung cancer (NSCLC). The study plans to randomize approximately 136 patients with Met+ tumors who have failed first-line gefitinib, to tepotinib 500 mg/d plus gefitinib or tepotinib plus cisplatin/pemetrexed. The primary endpoint is progression-free survival (PFS). In the second quarter tepotinib was moved to the Phase II part of an ongoing open-label Phase I/II trial in Asian patients to evaluate its efficacy, safety, and pharmacokinetics as first-line treatment versus sorafenib in subjects with treatment-naive advanced hepatocellular carcinoma. The study plans to randomize approximately 140 patients with Met+ tumors to tepotinib 500 mg per day or sorafenib 400 mg twice a day. The primary endpoint is time to progression.

In the field of oncology diagnostics, we signed an agreement with Illumina, Inc. in March 2015. We are working with Illumina to develop sequencing-based assays that detect and simultaneously measure multiple genetic variants in a single tumor sample in clinical trial settings. This will enable us to perform genome studies at a pace unheard of a few years ago, and could lead to the development of several diagnostics, thus strengthening our position as a global leader in precision medicine in oncology. In addition, we and our partner Sysmex Inostics GmbH announced that the first liquid biopsy RAS biomarker testing center opened in the Vall d’Hebron Institute of Oncology in Spain. The liquid biopsy method, also known as blood-based biomarker testing, is a simplified and rapid approach for determining the RAS (KRAS and NRAS) mutation status of tumors, as it requires a single blood draw, rather than a tissue biopsy or surgical procedure. The liquid biopsy RAS biomarker test is expected to receive its European Conformity approval (CE mark) in the coming months.

In November, our company announced that it had entered into a three-year collaboration to validate new therapeutic concepts in the field of oncology with Selvita, headquartered in Krakow, Poland. The aim of the collaboration is to deliver potential first-in-class small molecules as lead candidate drugs for multiple oncology indications. This collaboration will steer a joint portfolio of discovery projects in a risk/reward sharing model and builds on the framework that the two companies have developed during a two-year partnership in cancer metabolism, which began in 2013. Under the terms of the new agreement, we will have an exclusive license to the joint intellectual property and Selvita will receive milestone payments and royalties upon successful development and commercialization of products by our company.

Early in 2015 and following a review of all the data from our clinical studies, we decided to discontinue the development program for abituzumab (formerly known as DI17E6) in the area of oncology. A Phase Ib trial in solid tumors, in collaboration with Sanofi U.S., investigating pimasertib in combination with Sanofi U.S.’s hDM2 antagonist (SAR 405838) was concluded and the development will not be further pursued. Furthermore, after reviewing the competitive environment, we decided to return our rights outside China to the PARP inhibitor BeiGene-290 to BeiGene.

Our Biopharma business provides annual grants for outstanding extramural research in certain fields in oncology. This year’s Grants for Oncology Innovation were awarded to three groups (two from Spain and one from Italy) at a ceremony coinciding with the 2015 European Cancer Congress (ECC) in Vienna, Austria.

Immuno-Oncology

At the 2015 American Society of Clinical Oncology (ASCO) Annual Meeting, multiple presentations were made on the preliminary safety and efficacy of avelumab (formerly known as MSB 0010718C), an investigational fully human anti-PD-L1 IgG1 monoclonal antibody that potentially uses the body’s own immune system to fight cancer. It included an oral presentation on ovarian cancer and posters on gastric cancer, non-small cell lung cancer (NSCLC) and several other studies in a range of patient populations. The NSCLC data were from the international open-label Phase I trial with multiple ascending doses that is investigating the safety, tolerability, pharmacokinetics, as well as biological and clinical activity in patients with metastatic or locally advanced solid tumors. In this analysis, the safety and clinical activity in 184 patients with stage III b/IV NSCLC who had progressed after receiving at least one platinum-containing doublet were assessed. Objective response was observed in 25 (13.6%) patients, including one complete response and 24 partial responses; 19 responses were ongoing at the time of the analysis, including in two patients who continued to respond off-treatment.

An oral presentation at ASCO 2015 showed data from the Phase I study for a cohort of patients with recurrent or refractory ovarian cancer, unselected for PD-L1 expression, with a median of four prior lines of treatment not including adjuvant treatment. Of the 75 enrolled patients, eight showed a partial response and 33 patients had stable disease, translating into a disease control rate (DCR) of 54.7%. The objective response rate was 10.7%. Further patients with ovarian cancer have been enrolled in the ongoing Phase Ib study and Phase III studies in platinum-resistant or platinum-refractory and platinum-sensitive ovarian cancer are planned.

Clinical data of avelumab from a Phase I study in Japanese patients with advanced gastric cancer were also presented at ASCO. Of the 20 patients treated who had received multiple prior therapies, partial responses were observed in three patients. Enrollment of patients into the Japanese study has continued and further studies in patients with advanced gastric cancer are planned. Six abstracts were presented at the annual European Cancer Congress (ECC) held in Vienna in September. New data were presented in urothelial (e.g. bladder), mesothelial (e.g. pleura) and gastric/gastroesophageal cancers. Additional NSCLC and ovarian cancer data from Phase Ib trials were also presented.

Avelumab is currently being evaluated in a Phase II study in metastatic Merkel cell carcinoma (MCC) known as JAVELIN Merkel 200. MCC is a rare and aggressive form of skin cancer for which there is currently no specific therapy approved. The Phase II study is assessing the safety and efficacy of avelumab in patients with metastatic MCC who have progressed after at least one prior chemotherapy regimen. The primary endpoint is objective response rate, and secondary endpoints include duration of response, progression-free survival, overall survival and safety. A total of 88 patients were enrolled in this study by the third quarter of 2015 at sites across Asia-Pacific, Australia, Europe and North America. It is the largest clinical trial ever performed in this patient population. In the United States, the FDA granted avelumab Orphan Drug Designation in MCC in September, followed by Fast Track Designation and Breakthrough Therapy Designation in the fourth quarter of 2015. In December, the European Commission also granted avelumab Orphan Drug Status in metastatic MCC in the European Union following a positive opinion from the European Medicines Agency (EMA)’s Committee for Orphan Medicinal Products.

Our company and Pfizer initiated two international Phase III studies of avelumab in the treatment of NSCLC. The first study, JAVELIN Lung 200, was initiated in April, and aims to enroll approximately 650 patients. It will evaluate avelumab in patients whose disease has progressed after receiving a platinum-containing doublet chemotherapy compared with docetaxel. The primary endpoint of this study is overall survival (OS) in patients with programmed death-ligand 1 positive (PD-L1+) NSCLC. The second study, JAVELIN Lung 100, is designed to assess the safety and efficacy of avelumab, compared with platinum-based doublet chemotherapy in patients with late-stage NSCLC who have not previously received any treatment for their systemic lung cancer. This Phase III study is an open-label, multicenter, randomized clinical trial, in which patients with recurrent or stage IV PD-L1+ NSCLC will receive either avelumab or the investigator’s choice of first-line platinum-based chemotherapy, depending on the patient’s histology (either squamous or non-squamous). The study expects to enroll approximately 420 patients at more than 240 sites around the world. The primary endpoint of the study is progression-free survival in patients with PD-L1+ tumors. Secondary endpoints include progression-free survival in patients with strongly PD-L1 positive (PD-L1++) tumors, overall survival, objective response rate, quality of life, tolerability and safety in patients treated with avelumab versus investigator-choice chemotherapy.

In December, our company and Pfizer announced the initiation of four additional Phase III studies investigating avelumab in further indications. JAVELIN Gastric 100 is designed to evaluate superiority of avelumab as a maintenance treatment for advanced or metastatic gastric/gastro-esophageal junction cancers versus continuation of first-line platinum-based chemotherapy. This randomized, open-label study aims to enroll around 650 patients at more than 220 sites across the globe. The study JAVELIN Gastric 300 will evaluate avelumab as a third-line treatment in advanced or metastatic gastric/gastro-esophageal junction cancers, in approximately 330 patients at about 170 sites worldwide. JAVELIN Ovarian 200 will investigate avelumab as a treatment for platinum-resistant/refractory ovarian cancer. Study investigators intend to enroll approximately 550 patients across more than 190 sites. In addition, avelumab will be evaluated as a maintenance treatment, in the first-line setting, for patients with urothelial cancer in the JAVELIN Bladder 100 trial. This study is expected to enroll around 670 patients across more than 200 sites in 38 countries. The primary endpoint for all these studies is overall survival.

We started a Phase I trial with a novel investigational agent known as M7824. This is an open-label, multiple-ascending dose study, aiming to enroll 106 patients. This potential first-in-class bifunctional immunotherapy is designed to simultaneously block two immuno-inhibitory pathways that are commonly used by cancer cells to evade the immune system, thereby potentially controlling tumor growth by restoring and enhancing anti-tumor immune responses.

To enhance our R&D technology portfolio in immuno-oncology we entered into an exclusive strategic collaboration and license agreement with Intrexon Corporation to develop and commercialize Chimeric Antigen Receptor T-cell (CAR-T) cancer therapies. CAR-T cells are genetically engineered T-cells with synthetic receptors that recognize a specific antigen expressed on tumor cells. When CAR-T cells bind to a target, an immunological attack against the cancer cells is triggered. Utilizing Intrexon’s cell engineering techniques and RheoSwitch® platform, the collaboration aims to develop leading-edge products that empower the immune system to overcome the current challenges of CAR-T therapy. The collaboration will thus focus on developing a next-generation CAR-T platform to generate drug candidates.

Neurology/Immunology

In the field of multiple sclerosis we announced in September that we intend to submit data on our investigational treatment, cladribine tablets, for the treatment of relapsing-remitting multiple sclerosis (RRMS) to the European Medicines Agency (EMA). The decision follows our evaluation of new data and additional analyses which allow a better characterization of the compound’s benefit-risk profile. Submission plans for other parts of the world are also being developed. We had wound down our clinical development program for cladribine tablets in 2011 after some regulatory authorities expressed concerns over the insufficient characterization of the drug’s benefit-risk profile. Nevertheless, several large clinical trials were allowed to continue and additional safety information was also collected in a long-term registry.

At the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) meeting held in Barcelona in early October, eight abstracts were presented on Rebif®, our high-dose, high-frequency interferon beta-1a for relapsing forms of multiple sclerosis (MS). Data presented included post-hoc assessments of controlled studies in relapsing MS of predictive scores for disease activity and disability progression, as well as a cost-effectiveness analysis of Rebif® vs. Avonex® (interferon beta-1a) based on the “no evidence of disease activity” (NEDA) measure. These new data should help healthcare professionals and patients to make informed treatment decisions and to better understand the impact of Rebif® in patients with relapsing forms of MS.

The annual Grants for Multiple Sclerosis Innovation (GMSI) are awarded by our company for outstanding extramural research projects in certain fields of MS from all over the world. In 2015 the awards were made on the occasion of the 31st congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) to four research groups from Finland, Italy, the Netherlands, and the United Kingdom.

In 2015, the “Journal of Neurology, Neurosurgery and Psychiatry” (JNNP) published 15-year follow-up data for Rebif® from the PRISMS (Prevention of Relapses and Disability by Interferon beta-1a Subcutaneously in Multiple Sclerosis) trial. The published data analyzed the relationship, over a 15-year period, between cumulative exposure to Rebif® treatment and other possible prognostic factors with long-term clinical outcomes in relapsing-remitting multiple sclerosis. In these post hoc exploratory analyses, higher-dose exposure to IFN β-1a and longer time on treatment were associated with better long-term outcomes over many years in patients with RRMS.

Patient enrollment was completed for the Phase IIa study of M2736 (also known as ATX-MS-1467), an investigational immune-tolerizing agent. This is an open-label, one-arm, proof-of-principle trial to evaluate the safety of M2736 and its effect on immune tolerance in subjects with relapsing multiple sclerosis which involves frequent neuroimaging using magnetic resonance imaging. The outcome of the study is expected in 2016.

In the field of immunology, our soluble fusion protein atacicept met an important milestone in fully completing patient enrollment into the ADDRESS II study, a Phase IIb clinical trial in patients with systemic lupus erythematosus (SLE). The target of 279 SLE patients was met ahead of schedule, and key results from the study are expected in 2016. Clinical Phase I testing of our BTK inhibitor (M2951) in patients with SLE began in the fourth quarter of 2015.

Fertility

Ovidrel® (recombinant-hCG), used to trigger follicle maturation and ovulation, was assessed in a Phase III trial in ovulation induction (OI) in Japan to bridge to the existing ovulation induction and advanced reproductive treatment (ART) data from global pivotal trials. We are currently preparing a regulatory submission in Japan based on the positive outcome of this trial.

The Biopharma business announced its support of the Grant for Fertility Innovation (GFI) fund with grants totaling up to € 1.2 million for the years 2015/2016. The announcement was made during the 31st annual meeting of the European Society of Human Reproductive and Embryology (ESHRE) which took place in Lisbon, Portugal. Launched in 2009, the GFI is dedicated to transforming innovative translational fertility research projects into concrete health solutions to improve the outcomes of assisted reproductive technologies (ART). In the last six years, approximately 750 applications to GFI were received from over 50 countries around the world.

Endocrinology

In July 2015, the European Commission (EC) authorized an update to the European marketing authorization for Kuvan®
(sapropterin dihydrochloride), to allow its use in children with phenylketonuria (PKU) below four years of age who have been shown to be responsive to such treatment. This EC decision was based on a review of data from a Phase III b clinical study known as SPARK. On October 1, we announced that we had reached an agreement with BioMarin Pharmaceutical, Inc., San Rafael, California, USA, to return the rights to Kuvan to allow us to focus on core areas within our Healthcare business sector. We also agreed to return our option to develop and commercialize Peg-Pal, an investigational drug that is also designed for the treatment of PKU.

The annual Grant for Growth Innovation (GGI) is awarded by Biopharma for outstanding extramural research projects in the field of growth disorders. In 2015 the GGI was awarded to two research groups from the United Kingdom and the United States at a ceremony which coincided with the 54th European Society for Paediatric Endocrinology (ESPE) conference in Barcelona, Spain.

General Medicine

We announced on November 3, 2015, that the United Kingdom regulatory authority had approved an updated labeling for Glucophage® XR (extended release metformin) for the treatment of patients with type 2 diabetes. The label change removes from the list of contraindications moderate renal impairment stage 3a in the absence of other conditions that may increase the risk of lactic acidosis and chronic heart failure. This means that in patients with stable chronic heart failure Glucophage® XR may now also be used with a regular monitoring of cardiac and renal function. Earlier in the year, the French regulatory authority had already approved an update of the labeling for Glucophage® IR (immediate release metformin), removing the same contraindications. The label changes apply to all countries in the European Union. The decisions were based on analyses of our extensive efficacy and safety data collected over many years as well as new clinical studies available for Glucophage®.

Recently we received approval of metformin for the treatment of prediabetes in Hungary. This approval follows that in a number of other countries including Mexico, Poland, the Philippines, and Turkey where Glucophage® can already be prescribed for patients with prediabetes.

Neglected diseases

Our company promotes a Group-wide Access to Health initiative to address key unmet medical needs of neglected tropical diseases especially in children from developing countries. This includes an R&D platform with a focus on tropical and priority communicable diseases. In this connection, we obtained the rights to the investigational antimalarial compound known as DDD 107498, from Medicines for Malaria Venture (MMV). The objective of the future clinical program is to demonstrate whether this investigational compound exerts activity on a number of malaria parasite life-cycle stages, and remains active in the body long enough to offer potential as a single-dose treatment against the most severe strains of malaria.

As announced on September 11, 2015 Merck KGaA, Darmstadt, Germany, is preparing a regulatory submission to the European Medicines Agency.

2

Sponsored by the National Cancer Institute (USA).
More information on the ongoing clinical trials can be found at www.clinicaltrials.gov

Akt Protein kinase B

APRIL Proliferation-inducing ligand

BLyS B-lymphocyte stimulator

BTK Bruton’s Tyrosine Kinase

IL Interleukin

mAb Monoclonal antibody

PD-L1 Programmed cell death ligand 1

PK Protein kinase

Consumer Health

The Consumer Health business develops and sells over-the-counter medicines and food supplements in Europe, in particular in France, Germany and the United Kingdom, and in growth markets in Latin America, the Middle East and Africa, and Southeast Asia. The focus of our research and development activities is on the continuous improvement of existing formulations as well as on the development of new products and line extensions. We are following a consumer-centric innovation approach based on intensive market research across all our key markets. Since 2014, we have been establishing cooperation agreements with independent third-party research facilities to leverage their specific capabilities and expertise for the development of new products that meet the specific needs of our consumers.

Biosimilars

In 2015, our company proceeded successfully with the clinical development of biosimilars. One Phase I study was finalized and the biosimilar was moved to Phase III in the first quarter of 2016. Further biologics were added to the pipeline to secure an attractive biosimilars portfolio and a sustainable biosimilars business for us.

Allergopharma

Allergopharma, our allergy business, is one of the leading manufacturers of diagnostics and prescription drugs for allergen immunotherapy. With its own research department and in cooperation with research institutes and other partners, we are helping develop a better understanding of the immunological mechanism that underlies the development of allergies and are actively working on the next generation of drugs for allergen immunotherapy.

Life Science

Innovation is core to value delivery to our customers. Our Life Science business sector has more than 650 employees working in various R&D functions around the world. These employees cooperate closely with our customers to address their needs and pain points. Our ultimate objective is to solve the toughest problems in life science by translating ideas into product innovations. Once again, we invested significantly in R&D in 2015.

The year 2015 was marked by successful innovations. Our innovation activities are diverse and can be assigned to four categories. We want to:

Improve and expand our portfolio

Invest in new and disruptive technologies for the long term

Partner with our customers and

Drive dialogues on unmet needs in the scientific community and solve the relevant problems

Portfolio expansion

We made important product launches to expand our portfolio across all segments in 2015. In Biomonitoring, we made three additions to our MAS-100® product family of air samplers, expanding our Biomonitoring portfolio to food and beverage customers. The family of products, developed for use in isolators, allows sampling at critical control points. The compact and easy-to-handle design makes these products well-suited for use in controlled environments.

In RNA detection, we introduced a number of important new products. For example, our Magna ChIRP™ RNA Interactome Kits allow researchers to more easily identify, recover and analyze regions of chromatin. The kits provide reliable detection and discovery of RNA-associated genomic DNA sequences, RNA sequences and proteins.

In Process Solutions, we expanded our Provantage® Biodevelopment Services to include a Clone Generation Service. With this addition, we provide a full range of services to optimize yield, productivity, consistency and efficiency of clinical-trial drug products. Our services help accelerate time-to-clinic by delivering high-quality, high-expressing cell lines. Our flexible production platform offers a choice of cell lines and the fully documented clones meet traceability requirements for clinical production, IND submission and commercial manufacturing.

With the launch of our new Mobius® 2000 liter single-use bioreactor, we influence key standards such as microbiological film selection and single-use technologies, in both upstream and downstream production and we can provide a scalable solution to customers looking to perform single-use in upstream processing. This new bioreactor enables us to help customers in the biosimilars market implement manufacturing strategies in a short time frame to increase speed to market.

New and disruptive technologies

Our innovation efforts also focus on new technologies that have long-term impact. We received a United States patent for developing a selective membrane layering method that significantly improves the consistency of virus filtration performance. The method is used to manufacture our Viresolve® Pro device, a virus filtration technology that offers highly productive parvovirus clearance for monoclonal antibodies and therapeutic proteins. As a result of selective layering, the Viresolve® Pro device provides an industry-leading performance consistency superior to other virus filtration devices on the market.

To solidify our leadership in tangential flow filtration (TFF), we introduced single-pass TFF with Pellicon® cassettes, an enhanced application of our existing technology that allows concentration of process streams without the recirculation required in traditional TFF. This alternative application eliminates typical process constraints caused by higher volumes or concentration factors, resulting in increased capacity. It also enables continuous processing by coupling the TFF step in line with other process steps.

To further accelerate growth in cell analysis, we introduced the new Cellvento™ CHO platform of cell culture media and companion feed formulations for batch, fed-batch and perfusion applications. The chemically defined, non-animal-origin media deliver superior cell growth and productivity for various CHO cell types used in biopharmaceutical development and manufacturing. The range of products gives customers the flexibility to choose the most suitable product to achieve the best possible performance results for their specific cell line.

We also introduced a new technology that compacts dry powder cell culture media into granules and therefore improves solubility, facilitating the handling of cell culture media used in biopharmaceutical production. The compacted media are more convenient to use, allowing biopharmaceutical manufacturers to further optimize their upstream processes.

Partnerships

In February, we entered into a partnership agreement to provide upstream process development services for Precision Biologics, Inc., a Texas-based clinical-stage biotechnology company, to advance a preclinical monoclonal antibody. The antibody, NEO-201, binds to a tumor-specific antigen found in several forms of cancer, offering therapeutic potential across multiple cancer types, including colorectal, lung, ovarian and pancreatic – an especially deadly cancer with limited treatment options.

In May, we entered into an agreement with Singulex, Inc., a developer and leading provider of Single Molecule Counting technology for clinical diagnostics and scientific discovery, to manage its life science research business. We now have exclusive rights to further develop and commercialize the technology for research applications worldwide.

Driving scientific dialogues

In the field of filtration, we established a new Scientific Advisory Board, which held its inaugural meeting in 2015. The goal is to solve the most challenging problems in filtration in collaboration with our customers by bringing together application and technology experts. Board members include some of the most knowledgeable external filtration experts and renowned scientists as well as colleagues of our Life Science business. As a leader in filtration, we are committed to continuously exploring new and disruptive innovations in the field. The Advisory Board is focused on identifying and addressing the most critical unmet needs in the area of filtration.

In the third quarter, the scientific journal “Methods of Molecular Biology” published two chapters on the use of our Immobilon PVDF (polyvinylidene fluoride) membranes for protein analysis, authored by our experts. We were featured due to our significant presence in and contribution to Western Blotting, which is the most commonly used analytical technique in cell and molecular biology.

We also published an original white paper recognizing the emerging biotech community’s impact on the future of healthcare. This paper followed the Emerging Biotech Summit held in June in Philadelphia, Pennsylvania, hosted by our Life Science and Healthcare business sectors and attended by 40 biotech leaders from across the United States. There we established an open dialogue within the biotech community and gained insight from executives on the topics of advancing products faster through clinical development and bringing lifesaving drugs to market.

We received several major industry awards for our product innovations in 2015:

We received a Stevie Award for our AFS® Lab Water systems at the 2015 American Business Awards ceremony in San Francisco, California in September. The new Large AFS-E system was a finalist in the “Best Product – Health & Pharmaceuticals” category. Today’s diagnostic labs need multiple compact water systems to feed a single analyzer or a few smaller ones. Our AFS-E systems meet this need.

“R&D Magazine” presented us with two R&D 100 Awards in November. These awards are viewed as the “Oscars of Innovation” and recognize technologies in a wide variety of industries, including telecommunications, high-energy physics, software, manufacturing, and biotechnology. We won in the “Process/Prototyping” category for our AFS® water systems and in the “Analytical/Test” category for our Simplicon™ RNA Reprogramming Technology. This technology makes it possible to generate virus-free, human-induced stem cells safely and efficiently using a single transfection step, giving researchers an effective reprogramming method when studying diseases.

Performance Materials

We are the undisputed market and technology leader in liquid crystals (LC), which are primarily used in televisions and mobile communication applications. We are also one of the leading suppliers of decorative and functional effect pigments. Our high-tech materials and solutions are used by customers in the consumer electronics, lighting, coatings, printing technology, plastics applications, and cosmetics industries.

Display Materials

The latest generation of smartphones and tablets with their brilliant touchscreens would be unimaginable without the most recent advances in liquid crystal display technology. For these mobile devices we developed UB-FFS technology (ultra-brightness fringe field switching) with a new switching mode. This has the potential to increase display light transmittance by up to 15%. The new technology offers many advantages: Firstly, it consumes less energy and increases the battery life of mobile devices. Secondly, it improves mobile display quality and supports the trend towards higher resolutions. The market launch of UB-FFS is progressing very successfully; the new switching mode is already used in many smartphones and tablets. In April 2015, we received the German Innovation Award for this breakthrough technology. And in June, we received the 2015 Display Component of the Year Award in Gold for UB-FFS at the Society for Information Display conference in San José, California.

With the our LC 2021 strategic initiative, we are combining our future activities in liquid crystals. Firstly, our focus is on the further development of conventional display technology. We want to contribute to the realization of more robust, more flexible displays and the utilization of holographic 3D technology. Secondly, we are focusing on applications beyond displays. These include new light management systems and smart antennas for better satellite communication. Liquid crystal windows (LCWs) are another field of our work. They can regulate both the light and heat transmittance of windows in building façades. We are further investing in the development of materials for such applications. Pilot production of the first smart windows is in full swing. The first LCW panels were already used in the construction of our new Innovation Center in Darmstadt. Collaborations with partners in the glass and façade technology sector are planned for broad-based marketing of the windows.

The future and potential of display technology have been the topic of our annual Displaying Futures symposium for several years now. This year‘s symposium took place in San Francisco, where renowned futurologists convened with more than 100 of our customers and business associates.

In China, Japan, Korea, and Taiwan – four core markets for Performance Materials – around 700 customers attended workshops we held in autumn 2015 under the motto “Creating the perfect pixel – through partnership“. Most of the participants were researchers and engineers from various display panel manufacturers. The aim of these very successful events is to present our core competencies, discuss visions with our customers, demonstrate our technology leadership, and strengthen customer proximity.

High-quality pigments and functional materials

The Meoxal® brand is the latest development in effect pigments. These pigments captivate with their brilliant color saturation and exceptional performance. This is achieved by an innovative layer technology and the use of aluminum flakes as the substrate. The products are suitable for a multitude of high-performance applications, especially for automotive and plastic coatings.

With Xirallic® NXT, we are introducing a new patented product generation of the well-known high-tech effect pigments. These offer customers an exceptional “living-sparkle effect”, high styling potential and consistent quality. The first product of the new generation – Xirallic® NXT Panthera Silver – is a dark-gray, metallic effect pigment.

Besides high-quality effect pigments, we also produce functional materials for technical applications as well as fillers and active ingredients for cosmetics. The new cosmetic active ingredient RonaCare® SereneShield was presented in time for the important in-cosmetics exhibition in Barcelona in 2015. The active ingredient is intended to help the skin at any age to reduce susceptibility to acne.

In technical applications, we developed additives for the laser marking of plastics and conductive coatings. These additives are also used in heat-reflective glazing for greenhouses. In high-voltage technology, we are also working on functional materials, with which we want to tap into new markets in the area of energy management. Within the scope of the research project iShield, which in view of its future potential is also government-funded, we have been collaborating since autumn 2015 with academic and industrial partners to develop novel materials to shield generators and engines.

Integrated Circuit Materials

In the Integrated Circuit Materials business unit, which supplies products for integrated circuit manufacture, we have developed a range of products for Extreme UV Lithography (EUV) applications that have already been qualified by several customers in the semiconductor industry for their processes. The shrink technology makes it possible to reduce lithographically generated structures after patterning, thus circumventing resolution limitations of existing exposure equipment in a cost-effective manner. New products are on the verge of production implementation. We are a leader in Directed Self Assembly (DSA), a revolutionary technology that is crucial to all advanced semiconductor manufacturers. In DSA, the information for the smallest structures is already contained in the chemical makeup of the coating material. We are collaborating with our customers to introduce DSA as a standard integrated circuit (IC) manufacturing method in the coming years. Additionally, we are intensively engaged in developing thick perhydropolysilazane products for 3D chip technology as well as novel insulator materials.

The further development of flat panel display technology towards larger formats and higher operating frequencies requires the use of transistors with feature sizes that are at the limit of the resolution capability of the exposure tools. We have successfully transferred from the IC sector so-called tandem resin technology with a specific molecular weight distribution, thus achieving a photoresist resolution near the theoretical resolution limit. In silicon technology, new siloxane materials are in an advanced stage of qualification as planarization materials for high-resolution displays and as a thin film barrier for organic light-emitting diode (OLED) lighting.

Ormet, a company that we acquired in September, has developed conductive pastes based on a unique environmental friendly technology which can solve technical challenges in semiconductor packaging. This is particularly interesting due to the growing demand for highly integrated devices such as mobile phones or wearables.

Advanced Technologies

An outstanding example of our activities in the Advanced Technologies business unit are OLEDs, which are used in new lighting techniques and display technologies. OLEDs provide brilliant colors and sharp images from any viewing angle; they have a long lifespan and are highly energy-efficient. In addition, OLEDs enable round or flexible displays, making them perfect for use in the latest technical applications. One such example is the smart watch, a wristwatch that provides Internet access along with additional computer functionality.

The name of our product line for these types of applications is livilux®. We have developed a strong portfolio of worldwide patents, based on more than ten years of experience. Development partnerships with customers are a way of testing new technologies and making them market-ready. For instance, together with printer manufacturer Seiko Epson, we have established a technology that can be used to print OLED displays. While we contributed our expertise in OLED material and ink development to the collaboration, Seiko Epson provided its know-how in print heads featuring Micro Piezo inkjet technology as well as process expertise. The jointly developed technology offers the advantage of lower costs and higher material efficiency. In contrast to evaporated OLED displays, the materials are applied at room temperature under normal pressure in the case of printed OLED displays. In addition, this technique only deposits material in the areas where diodes are actually located, thereby helping to conserve resources.

With the acquisition of Qlight Nanotech, we want to further expand our leading position and deepen our expertise in the research and development of display materials. Operating as a research hub in Jerusalem, Qlight develops materials and applications based on semiconducting nanocrystals. It has a leading technology team with significant experience and innovations in nanoscience and nanotechnology used in lighting applications and for displays and screens, among other things.